How Big Tobacco stopped a smoking tax

Updated:May 19,2017

HELENA, Mont. (AP) May 19, 2017 — When the Montana Senate voted this spring for what would have been the state's first tobacco tax increase in 12 years, Big Tobacco lobbyists swarmed the Capitol in Helena.

With a crucial committee hearing about the bill looming in Montana's House, cigarette retailers and vape shop owners were coached by a lobbying pro on how to oppose it with concise and disciplined testimony. Residents inundated lawmakers with calls and emails mostly railing against the tax. A tobacco lobbyist with deep GOP ties appealed directly to the Republican House speaker.

Within a week the bill was dead, its demise a textbook example of how a well-financed industry can torpedo legislation.

Tobacco and other "sin taxes" perennially surface in many legislative sessions, and cigarette makers are used to fighting back. But Montana lawmakers and lobbyists say the opposition this year was particularly fierce.

"Montana is considered Marlboro Country," said Kristin Page Nei, a lobbyist for the American Cancer Society that supported the tax. Tobacco's supporters "know that if a red state like Montana can pass a tax, that other states will follow suit."

Public records and interviews with a dozen lawmakers and lobbyists reveal that two of the nation's largest tobacco companies launched an expensive and effective lobbying campaign to kill the Montana bill, which would have raised the state tax on cigarettes by $1.50 a pack and set a 74 percent tax on the wholesale price of vaping products, the state's first such tax.

Montana has had the same $1.70 tax on each pack of cigarettes since 2005, and the tobacco industry wanted to prevent another increase after it unsuccessfully fought a California voter initiative last November to raise cigarette taxes by $2 a pack.

The bill's sponsor, Democratic Sen. Mary Caferro of Helena, saw the higher Montana tax as a way to reduce smoking and the rate at which children use vaping products. The measure had rare bipartisan support in the solidly Republican Montana Legislature, thanks in large part to its potential to shore up the cash-strapped state's budget.

Altria Group, the parent company of Phillip Morris USA, and R.J. Reynolds focused their campaign on Montana's House, where strong anti-tax sentiment among conservative lawmakers was exacerbated by the recent passage of a state fuel tax increase.

The two companies spent a combined $147,000 on lobbying lawmakers in the first three months of the legislative session, according to disclosure reports filed with state commissioner of political practices.

Most spending came in March, when the tobacco tax bill began moving in the Senate, and the amount actually spent is certain to increase when April's disclosure reports are filed at the end of May.

The records made public so far show the two companies spent more money lobbying Montana lawmakers this session than they have over the last decade. Altria's $120,000 topped all lobbyist spending during the first three months.

Vape shop owners were coached on how to present compelling testimony before the House Taxation Committee. Extra tobacco industry lobbyists were hired so they could reach out to state legislators not courted routinely by the sector.

Altria spent $31,000 on advertising and communications in March, according to the disclosure reports. Posters and handbills appeared in convenience stores, gas stations and vape shops — urging tobacco buyers to reach to their legislators and complain about the tax increase.

"The legislators were getting hammered with emails and phone calls around this issue," said Amanda Cahill, a lobbyist for the American Heart Association, which also supported the bill.

R.J. Reynolds lobbyist E.J. Redding reported spending $1,960 on entertainment in March, including a $207 tab for a dinner attended by House Speaker Austin Knudsen and freshman lawmakers.

Redding and Altria lobbyist Mark Baker, who is a well-connected former executive director of the state GOP and has worked on the staff of a former U.S. senator and a representative, met privately with Knudsen to urge him to oppose the bill.

"Yes, there were attempts by the tobacco lobbyists to influence all of the members of the House, I imagine," Knudsen said. "They did not influence our decision."

Eleven of the 13 Republican bill co-sponsors changed their minds and bailed. Several insisted lobbying didn't affect them, saying they did research that convinced them to agree with the lobbyists' opposition talking points.

Six days after the Senate passed the bill, the House Taxation Committee held a hearing in which dozens of people testified for and against the measure.

The next day, the committee killed the bill with a rarely used measure called an "adverse committee report" that makes it nearly impossible for bills to be voted on by the House.

That same committee also approved a new estimate forecasting Montana would take in an additional $100 million in revenue over the next two years — essentially eliminating financial justification for the tobacco tax increase.

Rep. Zach Brown, a Bozeman Democrat and a taxation committee member, said he opposed the bill because it would have hit poor smokers the hardest.

But he believes the adverse committee report was a strategy hatched by tobacco lobbyists.

"They put the death nail in it, for sure," Brown said.

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